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Oil prices, exchange rates and stock markets under uncertainty and regime-switching

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  • Roubaud, David
  • Arouri, Mohamed

Abstract

We contribute to the ongoing literature on the interactions between oil prices, exchange rates and stock markets by considering the effects of economic policy uncertainty (EUP). Based on a VAR and a multivariate Markov switching vector autoregressive (MS-VAR) models, we show (i) significant interrelations between currency, oil and stock markets; (ii) relationships between the variables are rather non-linear; (iii) links between the variables change from one regime to the next, but they are stronger during volatile periods; and (iv) oil plays an active role in the transmission of price shocks to both the exchange rate and stock markets.

Suggested Citation

  • Roubaud, David & Arouri, Mohamed, 2018. "Oil prices, exchange rates and stock markets under uncertainty and regime-switching," Finance Research Letters, Elsevier, vol. 27(C), pages 28-33.
    • Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:28-33
    DOI: 10.1016/j.frl.2018.02.032
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    References listed on IDEAS

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    More about this item

    Keywords

    Oil price; US effective exchange rate; Stock markets; Uncertainty;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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